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Monetary Policy and the Stock Market: Some International evidence


  • Christos Ioannidis
  • Alexandros Kontonikas


This paper investigates the impact of monetary policy on stock returns in thirteen OECD countries over the period 1972-2002. Our results indicate that monetary policy shifts significantly affect stock returns, thereby supporting the notion of monetary policy transmission via the stock market. Our contribution with respect to previous work is threefold. First, we show that our findings are robust to various alternative measures of stock returns. Second, our inferences are adjusted for the non-normality exhibited by the stock returns data. Finally, we take into account the increasing co-movement among international stock markets. The sensitivity analysis indicates that the results remain largely unchanged.

Suggested Citation

  • Christos Ioannidis & Alexandros Kontonikas, 2006. "Monetary Policy and the Stock Market: Some International evidence," Working Papers 2006_12, Business School - Economics, University of Glasgow.
  • Handle: RePEc:gla:glaewp:2006_12

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    References listed on IDEAS

    1. Edward Nelson, 2000. "UK monetary policy 1972-97: a guide using Taylor rules," Bank of England working papers 120, Bank of England.
    2. Cecchetti, Stephen G. & Kashyap, Anil K, 1996. "International cycles," European Economic Review, Elsevier, vol. 40(2), pages 331-360, February.
    3. Cassola, Nuno & Morana, Claudio, 2004. "Monetary policy and the stock market in the euro area," Journal of Policy Modeling, Elsevier, vol. 26(3), pages 387-399, April.
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    Cited by:

    1. Sirucek, Martin, 2013. "Impact of money supply on stock bubbles," MPRA Paper 51476, University Library of Munich, Germany.
    2. Abdul Qayyum & Saba Anwa, 2010. "Impact of monetary policy on the volatility of stock market in pakistan," Economics Bulletin, AccessEcon, vol. 30(4), pages 1-28.
    3. Fausto Pacicco & Luigi Vena & Andrea Venegoni, 2017. "Market Reactions to ECB Policy Innovations: A Cross-Country Analysis," LIUC Papers in Economics wp4, Cattaneo University (LIUC).
    4. Moayedi, Vafa & Aminfard, Matin, 2011. "The Impact of Policy Shocks on Financial Structure: Empirical Results from Japan," MPRA Paper 39185, University Library of Munich, Germany.
    5. Širůček, Martin, 2015. "Kauzalní vztah peněžní nabídky a amerického akciového trhu
      [Money supply and US stock market causality]
      ," MPRA Paper 66357, University Library of Munich, Germany, revised 30 Aug 2015.

    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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